Stocks put their rally caps back on again yesterday after further evidence that the economy is slowing and more rate hikes may be moderate.

The Dow jumped 129.87, or 1.23 percent, to 10,652.20. But it was the Nasdaq composite index that really made investors’ days, rocketing up 181.59, or 5.34 percent, to 3,582.50.

That was the tech-packed Nasdaq’s seventh-best percentage gain ever, coming just two days after its best day ever.

The S&P 500 index gained 28.21, or 1.99 percent, to 1,448.81.

“Investors are starting to realize that the valuations are quite compelling,” said Phil Orlando, chief investment officer at Value Line Asset Management. “The Nasdaq suffered a 41 percent decrease from March 10 to May 24. Yet these technology companies are producing the most dynamic growth in the market.”

Orlando pointed out that there are some technology stocks that are trading as much as 50 percent off their highs, while their earnings are expected to be 30, 40, or 50 times higher in 2001 than they were in 2000.

Some of the hottest tech stocks yesterday were Cisco Systems, up $4 to $60.94; Microsoft, up $2 to $64.56; and Qualcomm, up $2.63 to $69.

The rally got its underpinning from four key economic statistics. The National Association of Purchasing Managers said its monthly factory index fell in May, reflecting slower growth in new orders and production.

Meanwhile, construction slowed last month, as did retail sales. But jobless claims were unexpectedly high.

“All four pieces of data suggest that the Fed’s six rate increases over the past 11 months have effectively slowed the economy, which means the Fed is very close to the end of its rate-hike mode,” said Orlando.

Even as investors rushed into stocks, they were abandoning bonds. The yield on the 30-year bond dropped below 6 percent for the first time in six months. It now stands at 5.95 percent.

Still, not all strategists are convinced this is the start of a new run-up, since many investors are still on the sidelines.

Yesterday, some 951 million shares were traded on the New York Stock Exchange, about 8 percent below the three-month daily average.

“We’re seeing much lower volume on the down days,” said John Davidson, of Orbitex Funds. “When we do have uptick days, people who have money on the sidelines start coming in. But there’s no rush.”